Vancouver, British Columbia, November 24, 2016 – Hemisphere Energy Corporation (TSX-V: HME) (“Hemisphere” or the “Company”) announces its financial and operating results for the three and nine months ended September 30, 2016.
Q3 2016 HIGHLIGHTS
- Drilled and placed on production Hemisphere’s first producing well from the Atlee Buffalo Upper Mannville G pool at an IP90 of over 60 boe/d (100% oil).
- Averaged quarterly production of 518 boe/d (87% oil), a 5% increase over the second quarter.
- Realized an operating netback of $16.36/boe, a 26% increase over the second quarter.
- Attained aggregate funds flow from operations of $345,007, a 116% increase over the second quarter.
- Significantly decreased absolute general and administration costs by 23% from the third quarter of 2015, or 33% year-to-date versus the same period of 2015.
- Completed construction of water handling and reinjection facility for production from the Atlee Buffalo Upper Mannville F Pool.
- Closed second tranche of financing for total gross funds raised of $1.9 million.
CORPORATE UPDATE
During the third quarter of 2016, Hemisphere closed its final tranche of a private placement of a combination of common shares and CDE flow-through common shares. Total gross proceeds from the financing were $1,921,055. Hemisphere has completed all required expenditures for the flow-through funds raised in the financing in the third quarter.
Hemisphere subsequently drilled its first horizontal development well into the Atlee Buffalo Upper Mannville G pool at the end of July 2016. Total costs to drill, complete, equip and tie-in the well was $685,000 which was 10% under budget and 45% less than the average cost of the 10 Atlee Buffalo wells drilled by Hemisphere in 2014.
This well was put on production in August and has averaged just over 60 boe/d (100% oil) over its first three months online and has produced almost 70 boe/d (100% oil) during the first half of November. It continues to show stable production rates, and management expects it to be capable of greater production in the future once a planned multi-well battery is constructed in conjunction with further development of the pool. All oil production is currently being trucked directly to sales, eliminating the need for any third party processing.
In September, a water separation and reinjection facility was completed for production from the Atlee Buffalo Upper Mannville F pool, which has enabled water rates at the injectors to be increased and has eliminated all water trucking for third party disposal. The Company continues to see successful results from its three active waterflood pilots in the pool.
Hemisphere has endeavoured to keep its decommissioning liabilities to a minimum by focusing on organic growth through drilling and targeted strategic acquisitions. Changes by the Alberta Energy Regulator (AER) require a minimum corporate Liability Management Ratio (LMR) of 2.0 to be eligible for certain transactions involving the transfer of existing AER licences. As of November 2016, the Company’s LMR is 4.54, which is among the top 15% of operating companies in Alberta. This ratio reflects Hemisphere’s deemed assets to deemed liabilities and puts the Company in a strong position for acquiring additional assets.
Hemisphere’s corporate production is currently at approximately 640 boe/d. For the remainder of 2016, the Company will continue to optimize its Atlee waterfloods and production while minimizing operating and transportation costs. Planning is underway for further development in both the Atlee F and G pools for 2017 provided the pricing environment continues to improve.
Financial and Operating Summary
| Three Months Ended September 30 | Nine Months Ended September 30 | |||||||
| 2016 | 2015 | 2016 | 2015 | |||||
| FINANCIAL | ||||||||
| Petroleum and natural gas revenue | $ | 1,630,105 | $ | 2,043,781 | $ | 4,014,662 | $ | 8,256,065 |
| Petroleum and natural gas netback | 779,966 | 1,094,625 | 1,486,898 | 4,876,856 | ||||
| Funds flow from operations(1) | 345,007 | 714,502 | 257,387 | 3,292,017 | ||||
| Per share, basic and diluted | 0.00 | 0.01 | 0.00 | 0.04 | ||||
| Net loss | (413,340) | (4,755,531) | (2,060,620) | (5,977,362) | ||||
| Per share, basic and diluted | (0.00) | (0.06) | (0.03) | (0.08) | ||||
| Capital expenditures, including
property acquisitions |
1,457,530 |
1,384,222 |
2,006,613 |
2,347,005 |
||||
| Net debt(2) | 11,384,586 | 10,621,038 | 11,384,586 | 10,621,038 | ||||
| Bank indebtedness | $ | 10,670,689 | $ | 9,659,252 | $ | 10,670,689 | $ | 9,659,252 |
| OPERATING | ||||||||
| Average daily production | ||||||||
| Oil (bbl/d) | 450 | 507 | 422 | 663 | ||||
| Natural gas (Mcf/d) | 400 | 1,026 | 493 | 1,045 | ||||
| NGL (bbl/d) | 2 | 1 | 2 | 2 | ||||
| Combined (boe/d) | 518 | 678 | 506 | 840 | ||||
| Oil and NGL weighting | 87% | 75% | 84% | 79% | ||||
| Average sales prices | ||||||||
| Oil ($/bbl) | $ | 37.28 | $ | 38.13 | $ | 32.58 | $ | 41.32 |
| Natural gas ($/Mcf) | 2.24 | 2.81 | 1.72 | 2.67 | ||||
| NGL ($/bbl) | 32.88 | 16.61 | 26.05 | 21.40 | ||||
| Combined ($/boe) | $ | 34.19 | $ | 32.74 | $ | 28.94 | $ | 36.02 |
| Operating netback ($/boe) | ||||||||
| Petroleum and natural gas revenue | $ | 34.19 | $ | 32.74 | $ | 28.94 | $ | 36.02 |
| Royalties | 4.64 | 2.50 | 3.15 | 2.67 | ||||
| Operating costs | 7.92 | 9.95 | 10.47 | 9.25 | ||||
| Transportation costs | 5.27 | 2.76 | 4.60 | 2.83 | ||||
| Operating netback(3) | $ | 16.36 | $ | 17.54 | $ | 10.72 | $ | 21.28 |
Notes:
- Funds flow from operations is a non-IFRS measure that represents cash generated by operating activities, before changes in non-cash working capital and may not be comparable to measures used by other companies.
- Net debt is a non-IFRS measure calculated as current assets minus current liabilities including bank indebtedness and excluding flow-through share premium.
- Operating netback is a non-IFRS measure calculated as the Company’s oil and gas sales, less royalties, operating expenses and transportation costs per barrel of oil equivalent.
About Hemisphere Energy Corporation
Hemisphere Energy Corporation is a producing oil and gas company focused on developing conventional oil assets with low risk drilling opportunities. Hemisphere plans continual growth in production, reserves, and cash flow by drilling existing projects and executing strategic acquisitions. Hemisphere trades on the TSX Venture Exchange as a Tier 1 issuer under the symbol “HME”.
For further information, please visit our website at www.hemisphereenergy.ca to see our corporate presentation or contact:
Don Simmons, President & Chief Executive Officer
Telephone: (604) 685-9255
Email: info@hemisphereenergy.ca
Scott Koyich, Investor Relations
Telephone: (403) 619-2200
Email: scott@briscocapital.com
